UPDATE – Entire Call Stream Added – Tesla Q2 Financial Call

AUG 2 2018 BY DOMENICK YONEY 98

No boring, bone-headed questions, please.

It’s been ten long years since the last Tesla earnings call with analysts in the first quarter of 2018, and now it’s happening again. Ok, maybe it’s just been three months, but with so much happening in the interim, it certainly feels like it happened a decade ago.

UPDATE – We’ve posted the entire call in video form below:

First, there was the backlash from that last call after CEO Elon Musk snapped at Bernstein analyst Toni Sacconaghi, referring to his followup question as boring and bone-headed. This was followed by a hard push to reach Model 3 production levels of 5,000 per week by the end of June that saw the company erect a new production line under a tent-like sprung structure and its top executive sleeping on the factory floor.

Of course, probably the most famous incident (of several) again involves Musk who, after responding to requests to help rescue a boys soccer team trapped in a cave in Thailand, built a “mini-sub” that ended up unused — the boys, thankfully, were rescued by divers. One of the British ex-pats involved in the rescue effort was later dismissive of Musk’s involvement and made a rude suggestion as to what he could do with his contraption. Musk then lashed out, referring to the ex-pat as a “pedo guy.” Though he deleted the tweet and later apologized, the damage was done. Did we mention the mini-controversy about his donations to a Republican PAC early in 2017? No? Well, that one was a bit overblown, but it added to the embroilment of the company.

Things have been relatively quiet for the past few days now, and the focus, even more than the earnings themselves, is now on the financial call with analysts. Investors will be looking at Musk and trying to judge whether the individual whose identity is so intertwined with the automaker that its fortunes depend on his stability, is, indeed, stable.

This time around, we’re going to try to bring you the most pertinent news from the call live, as it happens. We will begin updating this post as we listen in, beginning at 5:30 PM.

In the meantime, we leave you with this video interview of Bernstein’s Toni Sacconaghi of bone-headed question fame from earlier today of what he believes the investment community is looking for in this call.

Here’s what Bernstein’s Sacconaghi is looking for in Tesla’s earnings from CNBC.

Here follows our takeaways from the call:

  • Elon starts with thanks to employees for production of 7,000 vehicles in the last week of June and continuing that level of output through most of July. Suggests these deliveries are helping to drive sales.
  • Potential for increasing production with existing equipment is greater than expected. Aim to hit 10,000 a week next year.
  • Plan to be profitable every quarter going forward. (!!!) (There may be a few exceptions, Musk notes)
  • Autopilot team is there, introducing themselves. Will discuss what they are working on. Musk says making advances in neural net and other self-driving technologies.
  • AutoPilot 3rd gen hardware is developed should be deployed next year.
  • A lot of discussion about the superiority of the Tesla approach to AutoPilot development. An order of magnitude more processing power.
  • Toni Sacconaghi asks first question about what is driving increased vehicle margins. Musk apologizes to him for being rude on the last call. Musk puts increased margins down to improvements in the production process. Improved efficiency increases margins.
  • Robin Ren (world-wide sales) mentions about half of customers are choosing dual motors at the moment. Since configurator opened, many non-reservation holders are ordering.
  • Ren says top five non-Tesla trade-ins for Model 3 are Toyota Prius, BMW 3 series, Honda Accord, Honda Civic, and Nissan LEAF.
  • Musk apologizes to the next analyst, Joseph Spak from RBC Capital Markets. Gigafactory3 in China costs should be closer to $2 billion for 250,000 unit production to begin. Take lessons learned from building Gigafactory1 and apply them to reduce capital expenditures.
  • Note* Tesla up +$33 in after-hours trading, possibly due to much better performance here by Musk.
  • All Performance Model 3 Dual Motor sedans are assembled in the tent. Says efficiency level is higher in tent.
  • Analyst James Albertine asks about the funding of future projects. Musk says no to capital raises. China Gigafactory will be financed using loans sourced within China. Musk talks about paying off debts instead of financing them further.
  • Adam Jonas of Morgan Stanley remarks on the improved tone of the call. Asks whether Tesla tech can be turned into Terminators…talks of (China) turning tech into weapons-grade AI technology. (!!!) Asks if BMW or Amazon might be the bigger competitor in future. Musk laughs about the Terminator suggestion, doesn’t see Amazon getting into automaking.
  • Romit Shah asks about the coast-to-coast capability of AutoPilot. Musk says they could do it be “gaming the system” by focusing on a specific route, but wants the system to be more generally capable before releasing. Might be able to pull off a demo before the end of the year (believe he said the same a year ago). Breakthrough stuff coming in a month or so with Version 9 of AP.
  • John Murphy of Bank of America, is tent permanent and a model for future? Experiment for now but they are learning from its implementation. Musk says they are still aiming for steel frame buildings.
  • Confident in increasing margin projections – 15% in Q3, 20% in Q4, 25% in 2019? Musk: Yes.
  • Musk: Manufacturing at volume is mostly a software problem, which Tesla is good at. JB Straubel adds many problems came in Model 3 production when they outsourced some of the processes.
  • Ben Callow from Baird asks how close are they to being cash flow positive. Deepak Ahuja says they haven’t done July numbers yet, but will be cash flow positive by the end of the quarter. Musk adds they are confident in being profitable.
  • Tim Higgins from WSJ asks if they are confident in building 1 million units in 2020. Musk bounces around a few numbers, ends up at more than 7 to 8 hundred thousand with a shot at a million. They may announce Model Y production site before end of the year, as well as Europe Gigafactory.
  • Zachary Shahan of CleanTechnica asks about vehicle portfolio pipeline. Musk mentions the vehicles already known about, says production ability depends ultimately on battery production capabilities.
  • Musk says they are cell starved for Powerwall. Ramping up production later this year and next. Several hundred SolarRoof homes now, still in validation program. Will ramp up more next year.
  • Current bottleneck includes body production. Just made over 800 bodies in a 24-hour period.
  • Galileo Russell of Hyperchange asks about where Semi production will happen and whether it uses a lot of Model 3 parts. Musk demures on production location, says yes about Model 3 parts in Semi. Russel asks about future energy production and they discuss the ramping up process. Reveal PG&E energy project is over a GWh. They say its growing faster than automaking.
  • Speaking of future profitability, Musk says they won’t always be rolling in cash, but still should be cash positive. Should be self-funding, though with temporary debt, says it won’t constrain growth.

And that’s a wrap!

Overall, it was a very positive call. The apologies went a long way, and we suspect the huge stock price jump after-hours trading reflects that. Musk was tired, mumbling at times, but quite positive. The analysts had pretty good questions for the most part, and Adam Jonas was, again, a bit out there (though entertaining). We look forward to the next call in three months time when we hope to hear confirmations of, finally, profitability.

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98 Comments on "UPDATE – Entire Call Stream Added – Tesla Q2 Financial Call"

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Nix

I wish the live broadcast had a 1.5X or 2.0X speed setting like youtube recordings…. *grin*

William

Beginning at 5:30 PM EST?

Nix
ffbj
Nix

Energy business projected to grow to the size of Tesla’s car business over time. Wow.

It is like having another hidden 50 billion dollar market cap business hidden between the sheets of your already 50 billion dollar market cap company.

William

So there is a Tesla tooth fairy, hiding between the sheets!

$50 billion is a lot of hidden Gold coins!

(⌐■_■) Trollnonymous

“Energy business projected to grow to the size of Tesla’s car business over time.”

I highly doubt that, but then again, i’m just a Troll………

Pushmi-Pullyu

Yeah, that hype has worn rather thin. If there was that much business potential, then Tesla should be ramping up sales of PowerWalls and PowerPacks faster than it’s ramping up sales of the Model 3.

TheWay

There is more potential in the energy business than the car business. That said, the potential is much harder to fully utilize. The reason is that the biggest buyer would be government and utilities. But these entities aren’t just going to make bulk orders over night. They have to spend a year or 2 evaluating, then planning, permitting and etc.

The powerpack/powerwall business is like seeds being sown. You aren’t going to get them to grow faster by digging them out earlier.

And as battery prices continue to drop, the energy business will be even larger than the car business.

Someone out there

There are no margins in this business. Sure you could sell a lot of home batteries by selling them at a loss but that’s not going to help Tesla.

TheWay

At a loss? Looking at financials, they clearly made a profit in that business. It isn’t as big a profit as the auto, but that is mainly due to lack of economies of scale plus the added logistics. As economies of scale improve, the profit margins will go up.

REXisKing

Every solar home sale will have at least 1 battery, because the price is so low. In affluent homes there will be 3 batteries.

But, the real potential is to business and demand shifting.

Pushmi-Pullyu

“There is more potential in the energy business than the car business.”

Yeah, I should have been more specific: I don’t think there is that much business potential for Tesla in that market.

Li-ion battery cells optimized for BEVs are too expensive to be used for large scale grid energy storage. A cheaper per-kWh solution is going to be commercialized, sooner or later. Perhaps the “dirt batteries” seen in the “Search for the Super Battery” episode of PBS’s “Nova”?

And I don’t think Tesla is going to corner the market on commercial solar panels, either. China is too determined to undercut everyone else’s prices.

But I’d be happy to be proven wrong! 🙂

antrik

It doesn’t look like Li-Ion will be undercut on price by any other technology for short-time storage (up to a couple of hours) any time soon. It’s just seasonal storage where other technologies will become relevant.

nix

“There is more potential in the energy business” Yes, Tesla batteries have very high potential energy… *grin*

Paul Smith

It didn’t take that long in Australia, and having proven it there it can only get easier.

antrik

So, after listening to the whole thing, it’s clear that the reason they are not ramping storage deployment faster, is that they simply can’t get enough people to install them…

REXisKing

I highly doubt that too, the market clearly would be Ten Times larger than current sales, if they could produce the batteries.

This is clearly the wrong time for Tesla to show a Profit, they need at least 1 more Gigafactory Yesterday.

antrik

Nah, they just need to expand the current one. Even at 10x the current volume, storage batteries will still be just a fraction of what they use in cars.

Not that Dave

I think people underestimate the PG&E contract. They have 3 projects with three different companies so as to not have all their eggs in one basket, but when that model proves effective and profitable for them, other major utilities and governments will be knocking for similar very large projects. The Los Angeles one that is running is peanuts compared to the PG&E project. There will not be tens of thousands of these projects, but hundreds would be great and that is not including any powerwall purchases.

antrik

It’s not the first time Musk claims this — and it always surprises me… As far as I can tell, the global need for storage capacity (excluding seasonal storage, which need different technology) should be much smaller than the total need for EV batteries — and the battery in an EV is just a fraction of total automotive revenue…

Well, maybe they are counting on this market being less competitive, and thus being able to capture a much larger piece of the pie?…

Shaun

Tesla’s energy division involves more than just storage.

antrik

That’s true. However, the Solar Roof is a relatively limited market I think; and traditional panels are an extremely competitive market with very low margins…

Pushmi-Pullyu

Yeah, I don’t see Tesla’s commercial solar panels cornering the market, or even getting that much market share. The Chinese are much too determined to undercut everyone else’s prices.

I’d love to see Tesla prove me wrong on that, of course! 🙂

M Hovis

You have to think of it like the Tesla EV model. Everybody went after the subcompact when Tesla went after the luxury high end. What makes you think that all those people who have either a Model S, X, or both, won’t pony up for this premium solar project including storage? A lot of money to be made in that market for a number of years. Can’t grow that market forever but look what it did for EVs? The Model 3s that are selling now aren’t cheap.

BoltUp

Agree, why do people in the US (who eat mostly outside the home) have granite countertops when cheaper options exist? Tesla solar roof will go big once it hits a reasonable premium and will open the market to those who want a house to look like their idea of a house.

drpawansharma

Why is granite considered either premium or costly? Isn’t it one of the most common rocks on the earth?

antrik

It’s way harder to mine, process, and transport than a piece of plastic or wood…

antrik

I’m not sure Chinese competition is the major problem here. In the long run, I expect solar panel production to become more distributed around the world… Still, standard panels will always face fierce competition, even if it’s “only” domestic.

Paul Smith

You’re being redundant, repeating yourself, saying the same thing over and over and over and…..

TheWay

I would disagree, there is more to the battery market than just storage. Other than peak shaving and backup, there is the FCAS market and other grid services.

The market for battery storage is much larger than the car market.

pjwood1

..at a much lower margin. It’s mad. Many atoms.

JJG

I was looking for an answer like this. Energy storage supplementing existing grids seems to be growing rapidly. Especially after the well publicized issues of Puerto Rico and Australia.

antrik
Grid services are a valuable market, but pretty small in terms of required energy capacity. Peak shaving / load shifting / arbitrage are the major storage applications. But I believe they are all smaller volume than EV batteries. Let’s assume a very pessimistic scenario, where a significant part of global electricity comes from solar (rather than wind, hydro etc.); and let’s also assume demand response does little to match generation. In that case, maybe one third of all electricity generated needs to be stored for later use, once a day. On the other hand, on the long term, EVs might need maybe one third of global electricity generation. However, on average, EVs charge only every couple of days — meaning that the battery capacity here is actually several times larger than daily usage, and thus several times larger than storage! As I mentioned above, this might be different if there is a large need for seasonal storage. (Again, if demand response fails to alleviate the problem.) This market would be huge in terms of energy capacity, since it needs to store energy for weeks or even months. However, Li-Ion costs would be prohibitive: it would be cheaper to just overbuild… Read more »
Pushmi-Pullyu

Right; those analyses which estimate battery storage capacity in terms of weeks or months are rather clueless. A far better cost/benefit would be to build out approx. 3x or 4x as much solar power collectors as you need on a bright sunny summer day, so it will provide sufficient power on a cloudy winter day.

Of course, that requires 3x or 4x the land area, too. That’s fine for remote locations, but obviously won’t work for urban areas, especially multi-story buildings where rooftops already have inadequate square footage.

Buildings in cities are always going to need grid connection, so energy can be brought in from rural or wilderness areas, where land is cheaper and more sparsely settled.

antrik

Well, it depends. If someone comes up with a really really cheap storage technology (like, a few $/kWh), it could actually be cheaper than overbuilding.

Completely off-grid systems only make economic sense in very remote / sparsely populated areas. Otherwise, a grid connection is generally more efficient, since it helps balancing different sources (in most regions, solar and wind somewhat complement each other seasonally), as well as integrating demand response. Grids are expensive; but in most parts of the world, they are still quite a bit cheaper than generation, and thus should be more economical than massive overbuild.

Depending on the availability of affordable storage, demand response, and import/export, some overbuild might nevertheless be useful — but I’m guessing a realistic worst case would be less than 2x…

Counterpoint

Tesla has pulled off some of the biggest grid backup systems out there. As more of the electric grid depends on battery backup systems as opposed to natural gas power plants for peak energy consumption, Tesla is likely to get significantly more contracts. After all, they are a proven company in this area. I can definitely see their energy division seeing substantial revenue as a result.

antrik

No doubt about substantial revenue. I just have a hard time believing it could match automotive revenue…

Kbm3

They had mentioned 2x growth before. Glad to hear update they’re shooting for 3x.

nix

Sorry everyone, I didn’t mean to derail the story into a debate into whether or not Tesla will actually grow their energy business that much. Frankly I don’t know.

It was just so shocking to hear the idea in the conference call of there being the potential for a doubling of size of Tesla some unnamed distant point in the future, that I had to post.

At the risk of doing the same thing again, Tesla actually has a THIRD potential 50+ billion dollar market cap just hiding in the sheets! They have an entire Uber and/or car sharing platform that the Model 3 is supposed to enable. Uber has at points been valued around the $50B range.

A ride service/car share business has huge potential down the road. But alas! No firm time frames either.

But the concept of Tesla actually being 3 businesses in 1 is even more mind blowing. If they are even partially successful with these ventures, all this talk about car margins, car factories, car everything becomes just the tip of the iceberg when it comes to valuing future TSLA stock values.

antrik

I wouldn’t call it derailing. It’s a very relevant discussion in this context IMHO.

As for the transportation business aspect… The reason car makers are so eager go get into autonomy / car sharing, is that they are hoping to get into the transportation service business, which is actually several times larger than the automotive business!

However, I for my part am rather sceptical of these attempts. Car makers are fundamentally dependant on their brands — yet car brands are meaningless in transportation services… It’s really a completely different business, entirely orthogonal to their areas of expertise. There is basically no reason to believe that car makers can do better than independent transportation companies, which are more flexible.

Last time a large successful hardware company decided to expand into services, that was Nokia… I believe it’s what ultimately caused their demise a few years later: entering the services business put them in competition not only to the network operators (which were *also* trying to expand into services, with little success…), but more importantly, with existing service providers — such as Google. Seeing Google as a competitor, was what prevented them from switching to Android like every other vendor, thus dooming their hardware sales…

CDAVIS

@ OP DOMENICK YONEY – Good job on the call summary!

Pushmi-Pullyu

I second that!

Well done Domenick; take a well-deserved bow!

antrik

I’m surprised they are cell-starved for Powerwall: they only need a fraction of the cells they need for Model 3. Are there some specific difficulties with the NMC cells?…

Pushmi-Pullyu

My somewhat informed guess, based on some reports, is that Panasonic has been reluctant to build out cell supply much in advance of Tesla’s needs for the Model 3. That’s understandable, since the rate of Model 3 production was so very much lower than guidance last year, and I think even below the reduced guidance for the first quarter of 2018.

With Tesla finally getting up to speed in ramping up TM3 production this quarter, I think Panasonic was caught by surprise at the speed of increase.

JJG

Didn’t we just read that Panasonic is going to increase production at GF1 by 30%? Seems to tie in with this theory and the powerwall production issues reported.

Doggydogworld

Must be a problem with NMC. Energy storage is a rounding error compared to cars in terms of kWh, and they’ve made far fewer cars than planned for a full year. But they still need to use Samsung and LG? Makes no sense whatsoever.

antrik

Actually, according to https://electrek.co/2018/08/02/tesla-energy-powerwall-powerpack-battery-cell-starved-growth-crazy/ , the conference call more or less answered this question: because of the surge in Model 3 production, they decided to divert capacity from storage to automotive…

nix

I didn’t read the link (bad me), but in the call they also said they went to other battery suppliers for powerwall/powerpack, so there wasn’t a 1 to 1 sacrifice between Model 3 batteries vs. powerwall/pack battery demand. They have a bit of an escape valve by going outside their Gigafactory supply line and buying in the open market.

That doesn’t bode well for other companies also competing to buy batteries in the open market though…..

Doggydogworld

They said that, but it makes no sense. Panasonic had some incredibly huge inventory of cells ($300 million?) at GF in March because Tesla was so far behind schedule.

antrik

That number makes no sense whatsoever. That would be the cells for some 60,000 Model 3 battery packs — more than Tesla has produced Model 3s in total to this day…

pjwood1

Tomorrow will be interesting. The person here who once noted to put in (limit) sell orders, so shorts have to bid up other’s shares in order to buy their way back out, is what I am thinking about. So long as the price is higher than market, the position won’t trade and you force the short to give up a parting gift.

Couldn’t happen to a kinder bunch. \s

nix

As of this morning, sources quoting S3 were saying that the bigger shorters are trying to ride this out and hope this is just volatility.

Of course they said the same thing when TSLA crossed $100. They said it would come crashing back down. It never dropped below $100 ever again. Not for a single trade for a single second after it crossed $100.

If this happens again now with the Model 3 now clearly successfully in serial production, they may be making a very costly mistake.

Pushmi-Pullyu

I didn’t listen, but watched as the participants in the Tesla Motors Club “investors roundtable” thread discussed the conference call in real time. Interesting to see those who are very well informed on the subject of Tesla’s financials discuss the call. Link below.

High point of the evening: The investors’ excitement over Tesla claiming to have a chip that runs 10x faster than an Envidia (sp?) chip!

Low point: The boneheaded questions from Adam Jonas of Morgan Stanley, worrying about Tesla’s new chip being used by the Chinese to make Terminators, and asking Elon if BMW or Amazon might be the bigger competitor in future.

Seriously, Amazon.com as a Tesla competitor? I don’t think Amazon will be selling cars, nor manufacturing solar panels!

https://teslamotorsclub.com/tmc/threads/tsla-market-action-2018-investor-roundtable.105308/page-1102

Dav8or

True, but what about Apple? They are about to become a trillion dollar company. If there really is money in this electric car thing, or solar panel thing, what’s to stop them from taking over Tesla? Then of course, if Apple is making something, then by extension the Chinese are making something.

Artificial intelligence will get to the point that it serves no master and doesn’t care where it comes from. All it needs is the right hardware and right idiots to install the necessary software in that hardware.

It’s kind of a legitimate thing to be concerned about and Elon has expressed this himself.

Pushmi-Pullyu

I really can’t figure out why people keep suggesting Apple is going to get into the business of making cars. Apple is a light industry manufacturer making a fat profit margin on selling consumer electronics.

Why would they want to enter a heavy industry requiring massive capital investment yielding only thin profit margins, like making automobiles?

It doesn’t make any sense at all. Might as well suggest Apple will start making farm tractors.

nix

Foxconn does all their heavy lifting in manufacturing anyways.

Doggydogworld

If they could get away with it they’d design cars and have Chinese companies build them.

Someone out there

NVidia has been developing their technology for 20+ years. Making cutting edge chips is really hard even if you know what you are doing. That Tesla suddenly has developed a chip that is 10x faster than the product coming from one of the largest chipmakers out there is simpy a lie.

Shaun

If they said their chips had 10x the raw computing power you would be right, but that isn’t what was said in the call. They basically designed the chip architecture around their software, similar to what Apple does with their mobile chips.

Pushmi-Pullyu

Yeah, thanks; my comment on that was much too vague. Mea culpa.

Elon said Tesla has designed a specialty chip specifically to run Autopilot software, which he claims will run 10x faster than the general purpose chip they’re using now.

That’s not gonna compete with NVidia or any other chip maker at all.

Doggydogworld

Bitcoin mining chips can hash 10x faster than NVidia GPUs. They aren’t more powerful, just more specialized. They’re basically hardwired to run a specific algorithm. Works great until they change the algorithm in some small way.

Tesla’s main problem isn’t algorithm speed, of course. But Tesla’s volumes do justify an ASIC, and it gives them something to talk about.

nix

Bitcoin mining app for Tesla autopilot computers? *grin*

JJG

They could also be using a similar concept to AMD’s APU which would easily outclass an Nvidia GPU.

antrik

As far as I can tell, AMD’s APU is just a fancy name for a bunch of CPU cores and GPU cores on the same chip — which is exactly what Intel and nVidia are doing, too…

antrik

Nvidia has been doing GPUs for 20 years (actually, I think it’s more like 25?); and they have been doing generic compute for maybe 10 — but specialised chips for tensor (neural network) processing are just as new to them as to anyone else. (Google is probably the only one having somewhat of a lead there.)

Of course, Nvidia is also working on such dedicated processors now, and promises they will be 10 times faster than their current GPU-based implementations as well — so Tesla’s claim that they are 10 times faster than the current Nvidia system isn’t surprising at all. It will be interesting to see who actually gets to market with this first…

BoltUp

Amazon does build spacecraft, so its not unlikely to step into terrestrial transport, but my guess would be personal air transport. The vacant market is air transport.

Pushmi-Pullyu

No, Blue Origin builds spacecraft. Amazon.com does not. That’s like claiming Tesla builds spacecraft because Elon Musk also runs SpaceX. Jeff Bezos may run both Amazon.com and Blue Origin, but Amazon.com isn’t in the business of building spacecraft any more than Tesla is.

antrik

Given the context, I’m pretty sure the question about Amazon being a competitor was related specifically to AI, where Amazon is definitely among the leaders.

Still, I don’t think AI will ever be a separate business for Tesla, as opposed to just complementing their products… So the question is indeed a bit strange.

Someone out there

So Tesla has lost $1.5 billion in the first half of the year, now they are supposed to be profitable going forward? No, it’s not going to happen.

M Hovis
The Model 3 just outsold ALL premium sedans combined in the US. Its EV sales equaled the remaining 40 EVs in the US market. They did so with a 10% margin even after crazy shenanigans like shipping equipment by air, and flying employees in from other sites. It doesn’t take much imagination to see how the profit margin improves just as Musk described in the call. August might be flat with 14,000 Model 3s, which if it is would still equal the total sales of the remaining 40 EVs in the US market. Sound like they still plan another blitz week of 6000 units in August, and looking to sustain 5000-6000 by the close of September. The Model S is long in the tooth, and only now are all other competitors getting to the table with their competitive offering. The closest competitor to the Model 3 might be the Chevy Bolt and they sold 1,175 units against 14,250. Tesla has a beautiful business model. They have tons of orders for a product with good margins. They have a desire to grow fast, and that has to be controlled. The best news might have been on the financing of Gigafactory 3.… Read more »
Doggydogworld

10% margin for Model 3? Where’d you get that?

antrik

There is no 10% margin. They claimed a slightly positive margin on Model 3 (someone mentioned 3% I think?); and around 20% for automotive on the whole. (A bit less or a bit more, depending on GAAP vs. non-GAAP.)

Doggydogworld

It probably will happen, at least for six months. The numbers are pretty straightforward. They’ll sell more S/X in Q3 and Q4. Model 3 cost per car will drop as they double production volume and reduce inefficiency (OT, scrap, etc.). Meanwhile Model 3 selling price will rise due to AWD and performance versions.

They have to get costs down a lot in order to sell a 35k version, though. Or even a 39,995 version. A lot of tailwinds turn into headwinds early next year.

Quebec 100% EV

yup, my guess is even when they start selling the standard range battery version it will first be sold with the currently produced premium interior (40K), for a long while before they unveil the “standard” interior…

antrik

More likely the other way around I’d say, since it should be an easier change to implement; and the battery is also more of a high-margin upgrade.

nix

Yes, and a non-PUP LR going on sale in Q3/Q4 would get lots of folks waiting for the SR off the bench trying to get cars before the end of 2018.

antrik

They said they will make the base version when they can do it without incurring losses, which *should* be around the end of the year — so I don’t really see a problem there… At least not a financial one. Mindshare might be a bigger problem, if it turns out they have to delay it even further…

Doggydogworld

They currently say 6-9 months for SR. No mention of $35k any more.

nix

Tailwinds increase next year as they open global sales. Ratio of high dollar cars stays high as they release to global markets.

It amazes me how often people forget that Tesla so far has only tapped less than half their global market, and they have the whole rest of the world to go.

Doggydogworld

Overseas high end isn’t a tailwind, it just replaces domestic high end. Ratio of high end cars will peak in Q3 then fall steadily. Costs will also fall as Tesla gets more efficient so it’s a race down.

Tesla guidance implies $52k build cost in Q3 at almost 5k/week. Base model has about 5k less build cost, so figure ~47k. There’s some low hanging fruit in terms of cost reduction, but 35k is still a long way off.

Nix

So the same sales tailwind in the US doesn’t count as a tailwind when it repeats in global markets?

Even though everybody knows that Tesla’s margin will be even BETTER than now when the second wave of global sales start?

Anybody rational would see that it will actually be a doubling down of tailwinds, with the same tailwind of opening new sales in a new market repeating, at the same time the tailwind from better margins hits. I’m sorry, but there is being wrong, and there is being irrational. What you are saying isn’t rational.

Get Real

LMFAO, serial anti-Tesla troll–Some Troll Out There has returned to the threads to once again lamely try and spread anti-Tesla FUD using multiple posts.
He can’t handle the truth!

You must be getting pretty nervous as Tesla rapidly progresses its “Secret Master Plan” by getting to very large scale mass production of compelling BEVs and into energy storage?

Pushmi-Pullyu

“…now they are supposed to be profitable going forward? No, it’s not going to happen.”

Well if you actually think so, then please do continue to make “short” investments in Tesla’s stock… and we’ll continue to laugh all the people whose shorts get caught in the wringer!

BTW — How has your TSLA short investment done over the past 2-3 months? Are you happy with what happened today?
😆

CDAVIS

From article: “Tesla up +$33 in after-hours trading, possibly due to much better (call) performance here by Musk… Speaking of future profitability, Musk says they won’t always be rolling in cash, but still should be cash positive. Should be self-funding, though with temporary debt, says it won’t constrain growth…”
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For Jim Chanos anti-Tesla wolfpack:

end is nigh… yours not Tesla’s

Doggydogworld

Some nutcase bears on Twitter and Seeking Alpha continually predict bankruptcy, but real shorts like Chanos don’t care. They simply think Tesla’s growth rate will slow long before they make enough profit to justify their valuation. They’re probably right, but there’s always a chance Tesla will beat the odds.

CDAVIS

@Doggydogworld: “Some nutcase bears on Twitter and Seeking Alpha continually predict bankruptcy, but real shorts like Chanos don’t care…”
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King Nutcase Chanos is the guy behind promoting the Tesla bankruptcy narrative… so if Chanos does not truly believe Tesla is going bankrupt then he is knowingly misleading his investors.

Pushmi-Pullyu

Yeah. If Chanos was only predicting that “Tesla’s growth rate will slow long before they make enough profit to justify their valuation”, then people like me would likely agree with them.

No, it’s all the conspiracy theories, Big Lies, and repeated claims that Tesla is faking its financial statements (and is on the verge of collapse), the repeated smear campaigns, which make Chanos and his ilk such scum of the earth, unfit for responsible or reasonable people to associate with.

Shaun

Chanos has said he thinks TSLA will go to zero, literally worth nothing.

CDAVIS

de·lu·sion·al

characterized by or holding idiosyncratic beliefs or impressions that are contradicted by reality or rational argument, typically as a symptom of mental disorder.

Based on or having faulty judgment; mistaken.

Example:

Delusional Jim Chanos said: “…We think the [Tesla] equity is worthless…” source
https://www.cnbc.com/2017/12/14/jim-chanos-we-think-tesla-is-worth-zero.html

Doggydogworld

“Equity is worthless” does not necessarily mean bankruptcy. There are lots of zombie stocks out there.

Also, the Twitter/SA crowd predict imminent BK – within 3 to 6 months (I should have emphasized this in my comment). I don’t follow Chanos, but the times I’ve seen him on CNBC he never said anything like that.

Nix

Equity is worthless is a damn far cry from the “They simply think Tesla’s growth rate will slow” like you claimed.

REXisKing

Funny, Tesla was up in after hours trading, but, today a big sale at start of market trading.
Why wouldn’t you make this big sale in after hours trading?

Anyway, a big sell volume like this is a good way to get a DISCOUNT.

nix

Profit taking. Folks who wanted to lock in the big bump in after hours trading sold at market open. Mid-day the market finally found direction after see-sawing all morning between profit takers and people deciding it was time to finally bet on Tesla. The market ran out of profit takers mid day and was left with just people deciding to bet on Tesla.

I would not be surprised if tomorrow were equally volatile. TSLA is a very volatile stock. The answer of whether it will go up or down is always “Yes it will go up and down”.

Meanwhile after today, Tesla short sellers are sitting on a paper loss of nearly $2 billion after stock rally….